As far as currencies go, the Australian Dollar has emerged as one of the most sensitive to risk sentiment. The Japanese Yen, on the other hand, is where traders retreat in times of stress. This is a chart of $FXA:$FXY (Aussie vs Yen) with the S&P500 behind it. Nice correlation right? If you’re not watching this cross, I think you’re cheating yourself.
When traders are putting risk on, the Australian Dollar outperforms the Japanese Yen. When traders are taking risk off the table, some go to the US Dollar, others go into US Treasuries, but most importantly, they are getting out of the Australian Dollar and racing into the Yen. I think we can watch this cross throughout the summer as a supplement to our everyday technical analysis across the major US Equity Averages.